Thursday, June 21, 2007

International trade agreements are good for the US because they reduce the taxes that consumers and producers pay on goods shipped internationally -- whether they be imports or exports. They've also had the indirect benefit of preventing the US government from going 'whole hog' in giving agricultural interests the subsidies and protections to which they feel entitled.

Leaders in Congress and the Executive Branch have been able to tell farm interests, 'I'd love to help you out, but the WTO (or the EU, or Australia, or Mexico, or whoever) will file a trade grievance and slam us with penalties.' Further, while administration officials routinely claim not to do this, it at least gives them an opening to push for more pro-market ag policy, on the pretext that some key trade partner is forcing it.

The Doha Round of trade talks has been on life support since before it began (remember Seattle?) and today is no different. Agricultural talks have again gone south, and participants are pessimistic -- as they usually are -- about the chance of reaching an accord.

Thursday’s collapse of talks aimed at jump-starting international trade negotiations could reduce pressure on lawmakers in both chambers to keep world trade considerations uppermost in their minds as they write the 2007 farm bill...

The failure to return to negotiations comes as Congress is writing the 2007 farm bill, which will determine federal farm policy for the next five years. A key issue has a proposal from the Bush administration to cut funding for “countercyclical” payments to farms and instead provide farmers direct payments unrelated to production or sales.

Direct payments are thought to provide less of a “safety net” for farmers, but they are also considered less distorting to the market, and thus preferable under WTO standards. But the collapse of Doha negotiations means backers of direct payments will no longer be able to argue that they would better comply with WTO.

Another proposal known as Farm 21, sponsored by Rep. Ron Kind (D-Wis.) in the House and former Senate Agriculture Committee Chairman Richard Lugar (R-Ind.), would phase out all farm subsidies and replace them with conservation payments. It too could suffer from the failed talks. Proponents had argued that the plan’s trade compliance requirements would protect farmers from future trade disputes.

Senate Agriculture Chairman Tom Harkin (D-Iowa), who said in a Thursday conference call that he expects his committee to begin marking up a Senate version of the bill after the July 4 recess, released a statement on the talks, saying, “I am very disappointed that discussion among trade ministers from these countries broke down, particularly since it now looks unlikely that an agreement will be reached any time soon.”

Harkin continued, “It is crucial that the U.S. proposal in domestic agricultural support be matched by similar improvements in offers from our trading partners in market access and export competition. We should have seen more willingness to match the U.S. offer, but we did not see it.”

Translation: if you're not going to give up your subsidies, why should we?